One of the Boston bombing suspects is dead and the second is on the loose and said to be 'armed and dangerous' after a dramatic shootout in the suburbs of the city.

The terrorist dubbed 'Suspect 1' by the FBI died in hospital with multiple gunshot wounds and possible blast injuries after a fierce gun battle rocked the Watertown area hours after a police officer was shot dead at the nearby MIT campus.

The other, named today as 19-year-old Dzhokhar A. Tsarnaev, of Cambridge, Massachusetts, who was seen on CCTV wearing a white baseball cap, has gone on the run.

Boston Police Chief Ed Davis said: 'There is a terrorist on the loose who wants to kill people - do not open your door'.

Today, sources said the suspects were believed to be from the Russia region near Chechnya and had lived in U.S. for at least one year.

Boston was in lockdown as police hunted the second suspect through the streets, with all mass transit shut and residents warned to stay inside

A transit police officer was critically wounded in the exchange of gunfire with the suspects, police added.

The drama unfolded hours after the FBI released images of two men named as suspects in the Boston blast which killed three and injured 176 on Monday.

The Middlesex district attorney said the two men are suspected of killing a Massachusetts Institute of Technology police officer on campus in Cambridge late last night, then stealing a car at gunpoint.